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Analysis: Housing Price Gains Mask Lingering Market Weaknesses
Tim Reid / Reuters / May 28, 2013
The recovery in the housing market is showing a pattern far different from what followed previous downturns, experts say, suggesting that the dramatic price gains of recent months may not be sustainable.
The surge in home prices, seen most recently in the Standard & Poor’s/Case-Shiller home price index released on Tuesday, is at least in part a function of record-low interest rates, extraordinarily low housing supply, and record-high volumes of investor money pouring into single family homes, analysts say.
That means that market fundamentals may not be as healthy as the headline price increase numbers would suggest.
In Western U.S. states such as California, Nevada and Arizona, the housing crash and resulting foreclosure crisis was particularly acute, and played a large part in the 2008 economic crash. Yet home prices in these regions are soaring, according to the Standard & Poor’s/Case-Shiller index, which tracks prices in America’s 20 largest metropolitan areas.
Prices in Phoenix, Arizona rose 22.5 percent in the past 12 months – the biggest gain among all U.S. cities – followed by 22.2 percent in San Francisco and 20.6 percent in Las Vegas.
Those increases were part of a national jump of 10.9 percent in the 12 months from March 2012, the biggest price gain since April 2006.
Still, out of 50 million U.S. homeowners, 10.2 million are still “underwater” – that is, owing more on their mortgage that their house is worth, according to the National Association of Realtors (NAR).
In California alone, two million homeowners are underwater. Another 500,000 are delinquent on their mortgage payments, according to figures from ForeclosureRadar.com